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Bankers and business people in Iowa had mixed reactions to the U.S. Senate’s passage of a financial regulatory reform bill aimed at regulating “too big to fail” players with new agencies.

The bill, the Restoring American Financial Stability Act of 2010, was passed by the Senate on May 20 and is expected to be reconciled in conference committee this week.

Barrie Christman, chairman of Principal Bank and a member of the American Bankers Association board of directors, said the banking industry is largely in favor of financial reform, just not some of the other regulations that come with the bill.

She said the industry is in favor of bringing non-bank financial companies under the same regulation as banks. She said 94 percent of the loans that caused the last financial crisis were not given out by banks.

The bill the Senate passed would create the Financial Stability Oversight Council, charged with monitoring large companies that would pose “risks to the financial stability of the United States” if they were to fail.

“These days, the delineations between different types of financial companies are quite blurred, so having an entity that looks over all of that and identifies systemic risk is a very good thing,” Christman said.

John Sorensen, president and CEO of the Iowa Bankers Association, said that although his group commends Congress for passing regulations that address the problem of non-bank institutions, the bill will hurt community banks in Iowa by adding regulation that has nothing to do with stopping another financial crisis.

“The biggest threat to small community-owned financial institutions is that growing regulatory burden,” Sorensen said. “So much of their staff time now is devoted to paperwork and just procedural burden and requirements that they have less time available to address customer needs.”

He said small banks in Iowa were not the instigators of the financial crisis, but will still face the blanket regulations if the bill is signed into law.

Christman said that because banks didn’t originate the bad loans that led to the crisis, they don’t need more regulation by a Consumer Financial Protection Bureau, which the bill also creates.

“Now we’re creating an agency that, to it’s credit, will wrap in theose non-banks that need to be regulated, but the problem is there is no way to carry out those regulations because there is no structure around their supervision.”

One of the changes the legislation proposes is how interchange fees work. Interchange fees are charged to retailers when customers use debit cards. If the bill becomes law, it would limit the fees banks put on transactions. Banks worth less than $10 billion would be exempt.

West Des Moines-based convenience store chain Kum & Go LC has been petitioning to end interchange fees and gathered 45,000 signatures supporting the measure.

“Unfortunately, the high costs of these credit card fees are passed on to the consumer,” said Kyle Krause, Kum & Go president and CEO, in a press release. “It is our corporate responsibility to try to reduce these fees and pass that savings on to our customers. We are pleased with the positive step forward the Senate made to hopefully change the system as it is today.”

Though Sorensen admits regulating interchange fees will help retailers, he said it will hurt banks; he said some community banks could halt debit card service if it costs too much.

“The sad fact of that is that we don’t think the benefits are going to flow through to the consumer,” Sorensen said. “We think it’s going to be helpful for the retailers, and we think it will put a lot of community banks in the position where they are not able to offer debit cards anymore.”

Sorensen said banks paid for a lot of the existing infrastructure for electronic transactions, and he said the Federal Reserve’s cost analysis doesn’t take that into consideration when it determines rates, along with the cost of fraud protection and data-breach protection. Christman also said fraud forces banks to take on a lot of risk that retailers don’t face.

“It doesn’t account for any type of profit,” Sorensen said. “Our fear, as the industry, is that we may have to offer a product that we lose money on.”

Because of that, Sorensen said, it could be hard for smaller banks to offer the debit-card service.

“Even though the retailers like to talk about this as a big bank, Visa-MasterCard issue, it has a dramatic impact on community banks,” he said.

Some retailers and small businesses in the East Village, have a different view of interchange fees.

Mike Draper, owner of Raygun, 400 E. Locust St., said banks wouldn’t need to worry as much about fraud if the United States adopted the European system, where customers have to enter their personal identification number for both debit and credit transactions.

Patrick Boltinghouse, owner of Vanity and Glamour Cosmetics, 412 E. Fifth St., said he doesn’t currently take debit cards because of the fees but would consider it if the fees weren’t there.

With more people starting to use debit cards, interchange fees start to add up for some retailers.

“It used to be the majority of our transactions were the rewards credit cards, and now I hardly ever see rewards cards. It’s like 80 percent debit cards. So reducing those fees, that’d be amazing,” said Tanya Keith, owner of Simply for Giggles, 400 E. Locust St.

Melissa Speridon, co-owner of Vitae Design Collective, 400 E. Locust St., said her business doesn’t take debit cards because she didn’t want to purchase the keypad system. Even if swipe fees were reduced, she said they wouldn’t change. “We’ll probably just stick with what we’ve got.”